Paulson v. Wein (In re Paulson)

477 B.R. 740, 2012 WL 4123397
CourtUnited States Bankruptcy Appellate Panel for the Eighth Circuit
DecidedSeptember 20, 2012
DocketBAP No. 12-6029
StatusPublished
Cited by12 cases

This text of 477 B.R. 740 (Paulson v. Wein (In re Paulson)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Paulson v. Wein (In re Paulson), 477 B.R. 740, 2012 WL 4123397 (bap8 2012).

Opinion

SALADINO, Bankruptcy Judge.

The debtor, Herman Eugene Paulson, appeals from a March 16, 2012, order of the bankruptcy court1 dismissing his Chapter 13 case and an April 24, 2012, order denying his motion for new trial. We have jurisdiction over this appeal from the final orders of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.

I. Background,

The debtor filed a voluntary petition for relief under Chapter 13 on August 22, 2011, apparently in furtherance of his efforts to defeat the claims of two creditors — People’s State Bank and Sunflour Railroad. People’s made certain loans to the debtor secured by various items of personal property. The debtor failed to pay the loans as agreed and People’s commenced litigation against him, resulting in a judgment of foreclosure from the Circuit Court in Roberts County, South Dakota, dated December 10, 2009. The court specifically awarded a money judgment against the debtor and granted People’s the right to possession of its collateral. The debtor did not appeal, although he did at some point seek a “writ of prohibition” from the South Dakota Supreme Court, which was denied. This bankruptcy filing came while People’s was engaging in efforts to collect its judgment and obtain possession of its collateral.

Sunflour Railroad filed a proof of claim in the bankruptcy case for $24,623.36 plus post-judgment interest based on a state court judgment. Attached to Sunflour’s proof of claim is a copy of the state court’s Supplemental Judgment and Order in Sunflour Railroad, Inc. v. Gene Paulson and Heartland Organic Foods, Inc., Civ. 01-138, Fifth Judicial Circuit for the State of South Dakota, Roberts County, for $19,280.00. The original judgment was entered in 2002 and the supplemental judgment is dated November 12, 2008. The debtor did not appeal the original or supplemental judgment. The claim is secured as a judgment lien on debtor’s property.

Not to be deterred by his lack of success in the judicial system, and in an effort to continue his challenge to the claims held by the bank and the railroad, the debtor convened a group of individuals to hear his cases against those creditors as an extrajudicial jury. He refers to this group as “the Peoples Seventh Amendment Jury.”2 The debtor appears to believe that his self-appointed jury convened outside of any state or federal judicial system somehow had the authority to void the final state court judgments held by the creditors because those judgments had purportedly been procured fraudulently. The “jury” also assessed punitive damages against the parties involved in the fraud.

Shortly after filing bankruptcy, the debtor filed a motion for declaratory judgment, apparently in an effort to declare the validity of the extrajudicial judgments [743]*743issued by his self-appointed jury. The bankruptcy court promptly denied the motion and the debtor did not appeal. Instead, he commenced a series of adversary proceedings, including proceedings against People’s and Sunflour. The bankruptcy court granted motions to dismiss both of those proceedings as attempted collateral attacks on final state court judgments.3 Debtor sought reconsideration in each case, but those were held in abeyance pending the bankruptcy court’s decision on the motion to dismiss the bankruptcy case.4

During the course of the bankruptcy case, the debtor filed five proposed plans of reorganization. Some of the modified plans were filed before the objection deadline on the prior plan had run, in an apparent attempt to address concerns expressed in objections filed by the Chapter 13 trustee, the bank, and the railroad. Each time, the plans contained vague language about selling collateral to pay People’s and language indicating Sunflour’s claim was invalid and would not be paid. Those parties objected to the terms of the plans, arguing that the plans lacked detailed provisions concerning proposed payments, failed to account for certain secured creditors, were not feasible, and did not appear to be proposed in good faith. The Chapter 13 trustee also filed a motion to dismiss the case on the grounds that the debtor was unable to propose a confirmable plan, had not been making timely plan payments as required by the Bankruptcy Code, and was causing unreasonable delay. The court scheduled an evidentiary hearing on March 7, 2012, on the motion to dismiss and on the fourth plan filed by the debtor. The debtor filed his fifth plan the day before the hearing, rendering the confirmation hearing on the fourth plan moot.

None of the parties offered evidence or testimony at the hearing. After listening to oral arguments, the bankruptcy judge ruled from the bench, giving the debtor an opportunity to convert the case to a Chapter 7 or it would be dismissed. When the deadline passed with no conversion having been filed, the court dismissed the case under 11 U.S.C. § 1307. In his oral ruling, the bankruptcy judge expressed concerns about the debtor’s (1) failure or refusal to properly provide for the secured claims of Sunflour and People’s; (2) inability to make the proposed payments; (3) lack of detail as to the proposed liquidation of assets from which to make payments; (4) failure to devote disposable income to unsecured creditors; and (5) mythical disposable income, given that the debtor and his wife had been using an inheritance to cover their living expenses due to a shortfall in income.

The court found cause for dismissal under § 1307 due to unreasonable delay stemming from the debtor’s inability to get a plan confirmed. The court placed the unreasonable delay element in context by noting that while the case had been on file only six months or so, five separate plans had been filed and the case was making no progress toward confirmation. Since no evidence was offered, the court declined to address the issue of good faith. However, [744]*744the court explained that it found cause to grant the motion to dismiss for the reasons of “the inability to confirm a plan; the four attempts to confirm a plan; the delay; the absence of feasibility for a plan; [and] the need to recognize the secured claims that you have, which would only make a plan more complicated.”5

In response to the judge’s ruling, the debtor filed a motion for new trial or amendment of judgment, to which the Chapter 13 trustee, People’s, and Sunflour objected. The court denied the motion via a detailed order methodically addressing the issues raised by the debtor’s motion. The debtor subsequently appealed the dismissal of his case and the denial of the motion for new trial.

II. Standard of Review

A bankruptcy court’s decision to dismiss a bankruptcy case for cause is reviewed for an abuse of discretion. Villarreal v. Laughlin (In re Villarreal), 304 B.R. 882, 885 (8th Cir. BAP 2004). A bankruptcy court’s denial of a motion for new trial, or to alter or amend a judgment, is reviewed with deference and will not be reversed absent a clear abuse of discretion. Suggs v. Regency Fin’l Corp. (In re Suggs), 377 B.R. 198, 203 (8th Cir. BAP 2007); Guy v. Danzig (In re Danzig), 233 B.R. 85, 93 (8th Cir. BAP 1999).

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Cite This Page — Counsel Stack

Bluebook (online)
477 B.R. 740, 2012 WL 4123397, Counsel Stack Legal Research, https://law.counselstack.com/opinion/paulson-v-wein-in-re-paulson-bap8-2012.